Amec’s new chief executive reveals strategy to slash costs as group admits profit will be £15m below expectations

Support services business Amec is selling its troubled built environment arm in an attempt to cut costs and boost margins.

During his strategic review of the company chief executive Samir Brikho announced that profit would be £15m lower than expected because of restructuring and legal costs in UK construction, and weak performance in pipelines and nuclear capital projects.

Amec said that restructuring costs in UK construction had increased by £5m and another £5m provision would be required for future litigation costs.

Brikho said that Amec would focus on high-end engineering and consultancy services in energy and industrial markets where the company has a good record.

Brikho said: “The business suffers from complexity and an excessive cost base, but we now have a clear and deliverable plan to turn it around and tranfsorm financial performance.”

The areas targeted by Amec include gas, oil, minerals and metals mining, nuclear, industrial, earth and environmental and wind energy. Amec is aiming for an operating margin of 6% in 2008 and 8% in 2010.

The built environment business being sold includes the building and civil engineering, building and facilities services, property developments and PPP divisions.

Amec is also to sell Buchans, its pre-cast concrete manufacturing business.

In a bold announcement Brikho said that uncertainty had hung over the company for too long. “I have already put in train plans for significant cost savings and operational improvements that will deliver to the bottom line in 2008 and beyond.”

Amec expects losses on ongoing litigation to increase by up to £50m to a maximum of £140m. The group says it has had to make a provision of £90m relating to future costs arising from disputes. It has also made a further £70m provision for projects that have been completed in America.

Shares fell 1.94% this morning, down 8.25p to 417p.